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If you're shopping for a house right now to take advantage of record-low mortgage rates, chances are good you've noticed that there aren't a lot of choices. If you're having trouble finding properties in your area, it's not because you're being overly picky -- it's probably because there are simply very few homes for sale right now.
According to a recent report from the National Association of Realtors (NAR), the inventory of single family homes on the market hit its lowest level since it began recording data in 1982. That's almost 40 years of data, and there have never in its history been so few homes for sale.
Unfortunately, this has serious consequences for those who want to purchase a property. And homeowners who can't find a home to buy risk missing out on an unprecedented opportunity to score an affordable mortgage, since average interest rates on home loans have also hit historic lows.
Why are there so few homes for sale?
According to the NAR data, at the end of October there were just 1.42 million properties for sale nationwide. This is a 2.7% reduction from the prior month. But it's a whopping 19.8% reduction from a year ago, when 1.77 million homes were available.
There are a lot of reasons why there are so few properties available for would-be buyers. Obviously, there's a pandemic, and some homeowners are reluctant to list their properties amid the current economic uncertainty, or because of fear of showing their homes to strangers. There's also incredibly high demand, driven by today's low mortgage rates.
More people are also purchasing second homes or investment properties, with investors or vacation-home buyers accounting for 14% of properties purchased in October. Demand for second homes is also pandemic-related, with some city-dwellers seeking bigger properties or spaces away from urban areas to retreat to as COVID cases surge.
What does low inventory mean for buyers?
Unfortunately, for those interested in purchasing a home, the low inventory is bad news. Not only is it harder to find a property to purchase when few are for sale, but you're also likely to end up paying a much higher price when you find one. Basic economic rules dictate that high demand plus a limited supply translates to elevated prices.
Sadly, many homeowners are finding themselves in bidding wars, or forced to make offers above asking price to get a property. While this can sometimes be the smart move -- especially if you get an especially good mortgage rate -- be careful that you don't overpay and buy in a bubble.
The bottom line? When you purchase a home, it's important to do your due diligence and make sure you buy at a fair price, with a mortgage you can easily afford. It'll be harder to do that now with high buyer demand and low inventories, so allow yourself extra time if you hope to buy a house in today's market.